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Eyes on Trade is a blog by the staff of Public Citizen's Global Trade Watch (GTW) division. GTW aims to promote democracy by challenging corporate globalization, arguing that the current globalization model is neither a random inevitability nor "free trade." Eyes on Trade is a space for interested parties to share information about globalization and trade issues, and in particular for us to share our watchdogging insights with you! GTW director Lori Wallach's initial post explains it all.

January 02, 2013

New Year's Resolution for the WTO: Let Countries Regulate Finance

Here's a new year's resolution for the World Trade Organization (WTO): make sure prevailing trade law does not prevent countries from enacting policies to prevent a next financial crisis.

Back in October, civil society organizations across the
globe urged
the World Trade Organization’s Committee on Trade in Financial Services (CTFS)
to hold a clarifying discussion about countries’ ability under WTO rules to employ crucial
capital controls and other measures to avoid and mitigate financial crises. To that end, more than 100 organizations
from across the globe participated in weeks of advocacy in support of a
discussion proposal submitted by WTO member state Ecuador, releasing
an impressive statement, penning op-eds, sending letters to officials, arranging
meetings with ministries, and reaching out to the press.

Civil society’s persistence paid off when, at the December 5, 2012 CTFS meeting, the Committee
agreed by consensus to approve the framework of Ecuador’s proposed “dedicated
and focused discussion” on the experiences of WTO Members in introducing
prudential measures, including macroprudential regulations or policy
measures. The discussion will be held
at the first quarterly meeting of the CTFS
in March 2013, with the possibility of continued discussion at the following
quarterly meeting in June of the same year.

Such a clarifying discussion is timely and important because more than 100
countries (including 40 developing nations) have financial services commitments
under WTO’s General Agreement on Trade in Services (GATS). Countries that have made such commitments now face the danger that GATS rules could prohibit the usage of policy tools needed to ensure financial stability (such as capital controls). Given this potential contradiction between GATS and financial stability, countries face three options: (1) implement financial regulation and risk facing a WTO challenge, (2)
choose not to institute a needed regulatory tool to avoid a threatened challenge,
or (3) alter their GATS commitments and comply with WTO-mandated compensation to affected member states--an option that may be particularly infeasible for developing countries.

While the Committee’s agreement to simply hold a discussion on
this topic may seem like a minor step, it is important to note that in 2011, the
U.S., EU and Canada rejected
the possibility of a review of the WTO rules in light of the financial crisis
and then continued to block even a discussion in the Committee two additional times
in 2012. But pressure for such a discussion continued to mount. In addition to the increased
advocacy by consumer, labor and development organizations and growing support
for a discussion by major developing countries, institutions such as the IMF have now officially shifted their
position on the use of capital controls, endorsing them as a legitimate tool for financial stability.

The fact that a dedicated discussion will take place at the
WTO signals that, thanks to Ecuador’s proposal and civil society’s
call for action, these developed countries have been forced to acknowledge that it is necessary to address concerns about the compatibility of WTO rules with financial regulation priorities. We will be eager to see the outcome of this dedicated discussion this year.

Comments

Finance industry is a vast industry. Finance sector is the biggest sector in the world, so the regulation of this finance industry must be good. Government should also take this New Year resolution that they must improve the current situation.

The government all over the country is finding it quite difficult to regulate policies just because of the competitive market. If talking as a whole Asian countries are growing fast especially China and making the things quite difficult for other countries. The main concept of China is to capture the International market and so they have did it, but is quite hinderous for the countries to survive. And so the other big countries are getting quite diplomatic with the Chinese reforms and policies.

It’s quite significant to set up resolution but you can set it to break away the debt trap and avoid future debt in your financial goal. Now, you may believe that breaking away from the debt cycle is easier said than done but these resolutions are easy to implement, and can assist you in securing your financial freedom.